If a Credit Card Account Is Closed by the Lender Can It Ever Go Into a Positive Status?

Credit card companies take the closing of an account very seriously, and when they do so the decision is usually permanent. Card companies usually close accounts because of nonpayment, and that process can take several months as the card company waits for the account holder to resume paying as agreed. When that does not happen, the card company closes the account -- with no chance for the account holder to reestablish it as a positive account.

Timeline

MSN Money reports that credit card accounts are usually closed and listed as charged-off after payments are six months behind. Some card companies may close accounts sooner. Charge-off is an internal accounting term and does not relieve the account holder of responsibility for the debt. Once the account is charged-off there is no option for reinstatement. The account is usually sold or assigned to a debt collector for collection.

Credit

Charge-offs are listed on credit reports and are considered very negative information. Charge-offs can force good credit scores to plummet, with the information remaining on the report for seven years. The effect on credit is a reason some people seek to re-establish a closed account by making up the missed payments. The credit card company or debt collector will accept payments, but that will not lead to a reopening of the account. Closure of an account can create a domino effect. Other creditors may notice the missed payments and charge-off through a regular credit review and react by closing other credit cards or reducing credit limits. Credit card companies do that to protect themselves from customers who are having financial problems.

Alternatives

Some credit card companies encourage former customers to reapply for new accounts. Full payment is necessary on the charged-off account along with a standard credit check. Some people with charge-offs spend two or three years repairing their credit and find that they qualify for a new account with their former card company.

Hardships

People wanting to keep their credit cards should communicate with their card companies when experiencing financial problems. Most credit card companies offer hardship programs that lower payments and interest rates during financial hardships such as illness, unemployment or divorce. It is also possible in some instances to skip payments for a month or two. The help could prevent a charge-off and a need to reapply. Hardship agreements are negotiated by contacting card companies by telephone or in writing.